So what are they keys to CRM success? Having spent the last five years in this business and working with countless implementations, the following points rise to the top of the list.

As mentioned earlier in this report, the phrase ‘Customer Relationship Management’ is backwards. Truly successful firms don’t succeed because of how well they ‘manage’ their customers – rather they use technology to allow the customer manage the relationship with them. Think about it from a customer’s perspective (and fortunately, we’re all customers). The companies that most customers most enjoy doing business with are those that let them pick and choose how the relationship works.

CRM isn’t about trying to control or manage the relationship with the customer so much as it is about providing options to the customer to choose how they’d like to do business with you. In simplest terms, companies that have effective CRM efforts become easy to do business with – customers return because they want to. Beginning any CRM initiative with this mindset is absolutely critical.

Another key is figuring out the business case for CRM – or to use a less consultingspeak phrase ‘where’s the money?’. How exactly is CRM going to pay off for your firm? Will it lower the cost of selling/marketing/servicing? How much? Will it increase the effectiveness of your selling efforts? If so, how do you quantify this, and what is the specific financial return you can expect? What are the specific cost savings? What’s the revenue benefit? How will it be measured and accounted-for?

So-called ‘soft’ metrics (Customer Satisfaction is a good example – as is the oft-cited ‘360 degree view of the customer’) that may be real but can’t be (accurately) measured should not be ignored. But for CRM to be both successful and embraced across the company – and particularly in those parts of the organizations expected to pay for it – hard-dollar financial returns need to be both demonstrated and recognized. Some specific examples of ‘hard’ and measurable metrics are discussed in steps V (Sales), VI (Marketing) and VII (Customer Service).

CRM is an investment – and like any investment it will only pay off if it’s used. Would your company invest in new office space if they did not expect any employees to occupy it? Of course not – yet far too many CRM (and other related technology) investments have been deployed without taking the necessary steps to make sure they’re utilized.

And what is the key to utilization? It’s simple really – it helps people do their jobs. If CRM doesn’t help (or worse, if it hinders) it won’t be utilized, and it won’t pay off. At every stage of the CRM planning and implementation process, the users of the solution(s) must be consulted – and their buy-in assured.

This doesn’t necessarily mean that you need to take your sales team off the road to deploy SFA (for example) – but it does mean that at least a few selected representatives/advocates from the sales team should be part of the implementation team. See step IX (Who’s on the Implementation Team) for more detail.

Also keep in mind the context of who the application is for. Since management normally budgets for and approves CRM, their needs are generally fulfilled. However, it is not uncommon to see situations where the needs of the actual users in Sales, Marketing and Customer Service are given less of a priority – or none. (This is particularly common with SFA deployments – see step V for more). The bottom line is that management needs CRM but so does your staff, and keeping those respective needs appropriately considered and balanced when making your decision will have a huge impact on your likelihood of success.

Another common mistake made by companies is focusing exclusively on the CRM applications while at the same time ignoring the data infrastructure that sits below them. Remember, customer data can be found in just about every corner of every application within a company’s IT environment – and most certainly not just within the CRM application.

The benefits of integrated data are many:

• Smarter Marketing: by using ideal customer profiles, you can target prospects that look like your best customers – and recognize them when they make inquiries

• Sales Effectiveness: by targeting ideal prospects and keeping the sales force focused on the right opportunities, you can increase overall close rates as sales maximizes their time with qualified leads (and minimizes with unqualified ‘suspects’)

• Proactive Service: by understanding your customers’ needs and preferences – not just for what they purchase but how they prefer to be serviced, you can both dramatically reduce cost(s) of service while at the same time enhancing quality – and gaining loyalty as well as promoting cross- and up-selling opportunities.

What’s most important is to be able to properly utilize all customer data – not just that which resides within the CRM application. This is the most critical role for the IT department – insuring that this integration takes place right from the initiation of the project. CRM cannot be a ‘stovepiped’ application – rather when it is embraced as a business philosophy (as it should be) it becomes clear why this integration is absolutely critical to success.

As noted previously, the term ‘CRM’ generally applies to applications developed for customer-facing employees, and specifically 3 groups – Sales, Marketing and Customer Service. Also as previously discussed, the goal of CRM is to not simply automate each of these areas independently, but to integrate those efforts such that customer data and processes are handled in a coordinated, consistent manner.

Nonetheless, the specific needs of each department must be independently considered as well. Regarding Sales in particular, CRM efforts must drive Sales Effectiveness – which while it is often labeled a ‘soft’ metric is critically important to making Sales-related CRM investments pay off. Put more concretely, Sales Effectiveness is seen in more granular metrics including close rate, win rate, order size and other metrics which measure how much revenue sales brings in, not how little sales efforts cost.

Many early SFA and CRM applications were not necessarily designed to improve Sales Effectiveness – but Efficiency instead. While increasing the efficiency – and lowering the cost – of Sales has a positive economic return, it generally does not provide any benefit to the sales force. In addition, many SFA tools offer the ‘benefit’ of helping Sales management track the activity of the sales force – again an organizational benefit, but no benefit to the actual salesperson.

It should be obvious that if the application does not benefit the salesperson, they have little to no incentive to use it. Having personally witnessed many instances where management has forced an SFA application upon a sales force (sometimes forcing reps to discontinue use of personal contact management applications that had been working well for them) based on vague promises of ‘helping’ – it was discovered that the application did not help and sometimes actually hindered sales efforts. The result? Salespeople refused to use the application – and the investment failed.

The perception that CRM has ‘failed’ is most often a result of this dynamic – misguided metrics and unrealistic expectations resulting in low (or no) utilization. To be successful, it is absolutely critical to focus on helping sales – and specifically helping them sell.

Marketing must also benefit from CRM – but in a much different way than Sales does. Specifically Marketing’s biggest problem in this day and age is that they are regularly asked by management to provide evidence that they are providing tangible value to the company. This isn’t the type of intangible value (a stronger brand, enhanced product positioning) that marketers have long promoted as the value of marketing, but rather requires evidence of real financial return delivered to the corporate bottom line.

While this in no way devalues the intangible benefits of marketing, it does force Marketing to work more closely in particular with both Sales and Customer Service executives to determine how their expenditures and efforts are resulting in higher sales revenue, and increased customer loyalty, profitability and lifetime value.

In particular, CRM systems should allow Marketing executives to manage the overall marketing/mailing list, directly contribute to the lead flow into the organization, to allow them to participate in managing that lead flow as well as the movement to and from the ‘prospect pipeline’ (such as keeping potential leads ‘warm’ via, regular, multi-channel communications so that Sales can focus on ‘hot’, ready-to-buy-now opportunities), and to provide the product, competitive and market information that will provide the key to success in front of the customer.

Have you ever heard the saying ‘It’s 10 times more expensive to get a new customer than it is to keep an existing customer’? While it’s perhaps oversimplified, it’s also true.

It also points to how CRM initiatives can help enhance Customer Service – and to how Service can provide measurable value to the organization. But before implementing technology, a different view of Customer Service and its value to the organization must be put in place.

Today most (although not all) customer service departments are both treated and compensated as cost centers, rather than profit centers. They are managed on metrics such as cost of service and call volume per service rep – and both management and service personnel are compensated based entirely on their ability to lower service costs.

There’s nothing inherently wrong with this – it always makes sense to both measure and manage cost of service – but a purely cost-based approach can work at counterpurposes with the broader goals of CRM. While customer profitability is affected by both revenue and cost factors, there is no doubt that the larger impact and goals of these initiatives are to increase the former, not reduce the latter.

Thus, for Customer Service to play a larger role in CRM – and for them to work more proactively and effectively with Sales, Marketing and other parts of the organization, a new mindset around how to manage service – and how to incent service personnel and deliver supporting application – must be in place. Again, metrics are key – good examples include the rate of cross- and upselling which takes place on service requests, and the correlation between satisfaction and repeat business. In other words, all functions (Sales, Marketing and Customer Service) must work together for CRM initiatives to be successful – and that success is measured by the holistic value of customer relationships – both from a revenue and profitability standpoint.

As suggested earlier, probably the most critical success factor driving CRM success is having CRM strategies decided by the business executives who manage customer interactions – more specifically Marketing, Sales and Customer Service. Yet, as obvious as this statement may seem, the fact remains that many companies still make decisions within their IT departments – treating CRM as they would other technology purchases (such as security and infrastructure management). The IT department will, of course, need to support the CRM application(s) – and for this reason needs to be fully involved in the selection process – but IT absolutely should not lead CRM initiatives.

Choosing the right approach to CRM – and defining the business drivers - provides much of the definition for what the ‘right’ CRM tools should be. CRM technology providers will often (although not always) map their technologies to specific business processes and objectives, which can help guide you toward a short list of appropriate technology vendors.

One of the factors most affecting the increased interest in CRM among SMBs is the reduction in investment risk that has been created by advances in CRM technology – and much of the credit for this risk-reduction has been a result of the advent of new delivery models for CRM. In particular, the ‘hosted’ CRM model, under which CRM applications are delivered as hosted web services via a web browser (and managed from a third-party data center) has become quite popular as an alternative to traditional ‘premise’ models.

Hosted CRM expands the CRM opportunity and has also had the positive impact of causing companies to evaluate CRM investments (or in the case of hosted solutions, expenses since there are no technology assets to capitalize) on the basis of their business benefits rather than solely on their technical capabilities.

Yet for all hosted CRM’s advantages, it must be remembered that this is essentially a ‘buy vs. lease’ discussion – and that the delivery model can easily be separated from the business case. Hosted solutions are not for everyone – and their benefits must be weighed alongside the advantages that more traditional ‘Premise-based’ solutions still hold.

There is no doubt that hosted solutions have added options to corporate CRM decisions, and provided companies with new opportunities to evaluate CRM and to ‘test it out’ at a lower upfront cost (although hosting can also represent a much higher long-term cost since the annuity cost can overwhelm any short-term savings in as little as a year – and sometimes even less). At the same time, the benefits and drawbacks of hosted solutions must be weighed against other delivery models – and by no means are these solutions a panacea nor are they right for all companies. For many businesses, the inherent flexibility, adaptability, integration and economies of scale delivered by more traditional ‘premise’ models remain both more attractive and appropriate.

The key to making the best choices is having the right team driving the decision. You should notice that this implies that you must assemble the team before you select the technology! Many companies, unfortunately, do just the opposite – and find themselves with technology decisions that are inappropriate and/or unsuitable to meet their business and technical requirements, and a frustrated team of people trying to retrofit an investment that never should have been made in the first place (or was at least made far too early).

Begin with leadership – a CRM project will have a much higher probability of success if there is an overall owner of the implementation, technology and strategy, who serves as the primary internal advocate for CRM and a rallying point for organizational momentum. That owner/leader should then look to supplement his or her requirements with a cross-functional team that encompasses needs and perspectives from other business-critical areas.

Overall, that team should include at least one representative from each of the following areas:

• Sales
• Marketing
• Customer Service
• Finance and/or Executive Management
• IT

While leadership is important, it is also critical that none of these concerns become too dominant. For instance, in an SFA-centric deployment, Sales would no doubt lead the project (with support from IT) but both Marketing and Customer Service should at least be aware of the project at a detail level – so that they are able to tailor and integrate any future efforts in their departments to utilize and work with
the application(s) and the data they produce. Without this participation, the ‘360 degree view of the customer’ – and more importantly successful CRM (even if it is implemented in phases) will not happen.

In addition, involvement from finance and/or executive management is critical to make certain that financial issues are considered and factored into CRM decisions. Of course, this also has the added benefit of insuring that investments are subject to approval, and that tangible financial benefits are agreed upon beforehand and incorporated into the investment approval criteria.

Finally, while IT, as previously stated, rarely (and I would suggest never) should be leading the CRM process, they should absolutely be included on the team – as it will be their responsibility to support the application and integrate it with other key business systems.

Last but most definitely not least, companies who succeed with their CRM initiatives leverage outside expertise in making the critical decisions necessary to gain perspective on what other companies are doing successfully (and not), to facilitate agreement and overcome internal obstacles and disagreements, and to provide advice and perspective that simply is not present within the company itself. Having the advice of someone who’s ‘been there and done that’ can be invaluable.

Far too often, however, companies believe that they must obtain this advice directly from the CRM technology provider/software vendor. In reality, excellent assistance and advice can often be found much closer to home.

For most Small and Medium-Sized Businesses, a large and growing number of Value- Added Resellers (VARs) and consultants can provide the localized, industry- and business-specific advice that makes the difference between success and failure. In addition, these partners can help your company sort through the competing options, provide investment protection (especially in a market where mergers and acquisitions between software companies are happening on practically a daily basis) and align your organization to surmount internal obstacles and succeed.